US stocks surge on upbeat earnings and forecasts

US stocks surge on upbeat earnings and forecasts

Stocks staged their biggest rally in two weeks tonight as earnings and economic reports reassured investors that the economy is continuing its recovery.

The Dow Jones industrial average rose 201 points after strong earnings from Caterpillar, UPS and other companies revived investors’ optimism about the recovery.

A better-than-expected report on housing and encouraging signs of growth in Europe added to the upbeat mood.

Investors who have been mostly selling on disappointing economic and earnings numbers had, at least for the moment, reasons to be buying.

Caterpillar said its orders are growing and production will pick up in the second half of the year. UPS raised its outlook because of spending by businesses. Caterpillar’s stock rose 2.1%, while UPS gained 5.9%.

Chris Hobart, founder of Hobart Financial Group in Charlotte, North Carolina, said the outlooks are especially important because, if companies expect to grow, that might get them to increase recruitment.

If improved outlooks lead to jobs growth, “then this can be better than a good quarter or good second half, (it can mean) we’ve got a good economy,” Mr Hobart said.

A report on the housing market, while still showing a slowdown, was reassuring because it was not as bad as investors expected.

The National Association of Realtors said sales of previously occupied homes fell to an annual rate of 5.37 million in June from 5.66 million a month earlier. Economists forecast the sales rate to fall to 5.18 million.

Traders largely wrote off a jump in the number of people seeking unemployment benefits for the first time as the increase was probably skewed by seasonal factors. Instead, investors focused on earnings from a broad range of companies that showed businesses are not seeing a slowdown in the recovery. News of corporate deals also lifted shares.

Meanwhile, European markets rose after a report showed unexpected growth in the 16-nation group that uses the euro.

In recent months, investors worldwide have been concerned that rising government debt in Europe would stall a global recovery.

A jump in Europe’s purchasing managers index reported today was a welcome relief after forecasts of a possible recession on the continent.

Economic reports from Europe were “a big surprise because everyone expects that to be the Achilles heel of the global economy”, said Anthony Chan, chief economist at JP Morgan Private Wealth Management in New York.

It was problems in Europe that set off the big drop in stocks in late April. As Greece struggled to make debt payments and ratings agencies downgraded the government debt of several companies, stocks plunged in the US on fears that the domestic recovery was in jeopardy.

Stocks then fell further as US economic reports showed that the recovery was at best bumpy. Some investors feared a “double dip”, or the economy falling back into recession.

The Dow rose 201.77, or 2%, to 10,322.30. The Standard & Poor’s 500 index rose 24.08, or 2.3%, to 1,093.67, while the Nasdaq composite index rose 58.56, or 2.7%, to 2,245.89.

Only 397 stocks fell on the New York Stock Exchange, while 2,675 rose. Volume came to 1.2 billion shares.

More on this topic

Modest day of trading as Wall Street breaks early for ChristmasModest day of trading as Wall Street breaks early for Christmas

Pound jumps after Irish-UK meetingPound jumps after Irish-UK meeting

Cut shares exposure, says €2.2tn top adviserCut shares exposure, says €2.2tn top adviser

All Irish firms selling into Britain hit by sterlingAll Irish firms selling into Britain hit by sterling

More in this Section

Ryanair sues Skyscanner over selling on of flightsRyanair sues Skyscanner over selling on of flights

Shannon-based engineering services firm Mincon eyes growth after €8m acquisitionShannon-based engineering services firm Mincon eyes growth after €8m acquisition

Airbus looks to reduce airline revenue volatilityAirbus looks to reduce airline revenue volatility

Oliver Mangan: Ingredients in place for more sterling volatilityOliver Mangan: Ingredients in place for more sterling volatility


Lifestyle

SECOND Captains is one of the long-running success stories in Irish podcasting. Ostensibly a sports show led by Eoin McDevitt, Ken Early, and Ciarán Murphy, the former Off The Ball team from Newstalk launched the podcast in mid-2013. two Monday shows are offered for free, with Tuesday-Friday behind a Patreon subscriber model and dubbed ‘The World Service’. It has more than 11,500 subscribers.Podcast Corner: First-class podcasts from Second Captains

The incredible life of Ireland’s first celebrity chef has been turned into a play, writes Colette SheridanHow Maura Laverty cooked up a storm

Their paths first crossed on the top floor of the library at University College Cork in October 2010 when both were students there so Amy Coleman and Steven Robinson were delighted to retrace their footsteps on their big day.Wedding of the Week: College sweethearts open new chapter

Peter Dowdall reveals why all roads will lead to Tullow in County Carlow on February 1Snowdrop patrol: Why all roads will lead to County Carlow

More From The Irish Examiner